Weak Form Efficiency and Calendar Anomalies: Comparison Between Developed and Developing Equity Markets

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Weak form Efficiency and Calendar Anomalies: Comparison between Developed and Developing Equity Markets
Syed Zulfiqar Ali Shah Assistant Professor-Finance, Department of Business Administration Faculty of Management Sciences, International Islamic University Islamabad E-mail: zulfiqar.shah@gmail.com Muhammad Husnain Ph.D Scholar (Finance) Mohammad Ali Jinnah University Islamabad Email: Husnain_ctn@yahoo.com Abstract Financial economists have continuously questioned the efficient market hypothesis especially in last decade. Major part of discussion is whether the equity markets are efficient and if not then up to what extent one can forecast the meaningful future movement of equity prices. On one side there are believers of random walk and contrary there are followers of chartist theories. Those who negate the random walk suggested that there exist anomalies in the equity markets and hence are not perfectly efficient. The major objective of this study is to check the weak form of efficiency and presence of calendar anomalies in equity markets of developing and developed countries. On the basis of most recent and relatively longer horizon (14 Year) data on daily basis and a range of powerful econometrics this study suggested that in broader sense both of developed and developing equity markets are weak form inefficient. Hence there is no remarkable difference in term of market efficiency in equity markets of developed and developing countries. Hence one can reject the random walk hypothesis and therefore presence of markets efficiency is again a matter of theory not as much practical. Key Word: Weak form efficiency, Random Walk, Calendar Anomalies, EGARCH JEL classification: G12, G14, G15

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Introduction The role of capital market in the economy of a country is to channelize the flow of resources from one party to other having different interest efficiently.…...

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